If the Budget gives what the market wants, these stocks may skyrocket

Finance Minister Nirmala Sitharaman will present the Budget on February 1, Saturday.

By Amit Mudgill, ETMarkets.com | Jan 24, 2020, 11.03 AM IST

IIFL Securities said since economic growth has been declining since last few quarters, the forthcoming Union Budget will have measures, reflecting the government’s intent to get the economic momentum back on track.

NEW DELHI: A possible tweak in income-tax slabs, some easing of the long-term capital gains tax, relief from dividend distribution tax (DDT), an increase in the government’s capital expenditure and further impetus to the real estate sector – are some of the common expectations that analysts have from the Modi government’s first full-year Union Budget in its second term.

Speculations around these measures have caused many stocks related to these themes to rally in the run-up to the Budget.

Antique Stock Broking says the government is likely to extend the existing income-tax rebate of Rs 12,500 to tax-payers having an income up to Rs 10 lakh in a bid to put more money in pockets. This, the brokerage said, will provide relief to 1.5-2 crore taxpayers, but may have a fiscal implication of Rs 25,000 crore.

Antique also expects income-tax deduction limits on investment made under Section 80C or deduction on housing loans to go up.

“These measures, if announced, may accelerate earnings of a whole host of consumption-linked stocks in auto (M&M, TVS Motors, Bajaj Auto), consumer durables (Crompton Consumer, Voltas), paints (Asian Paints), household-linked businesses (HUL, Colgate and Dabur) and retail (Avenue Supermarket),” the brokerage said.

Union Finance Minister Nirmala Sitharaman will present the Budget to Parliament on February 1, Saturday.

Emkay Global expects some excitement on the counters of L&T, NTPC and housing finance stocks such as HDFC and LIC Housing due to higher spending on railways, defence and possible measures to revive sentiment in the real estate sector.

Domestic stocks have rallied of late owing to renewed investor confidence from the government measures to support growth, which seem to have caused macro data to bottom out, said Phillip Capital. “We expect the momentum to continue post Budget. Last few Budgets have been a big dampener for the equity market,” the brokerage said.

Antique anticipates 5-10 per cent correction in the equity indices in case of any major disappointments. The brokerage said a 10 per cent increase in capital expenditure target for FY21 could give boost to stocks such as L&T, NTPC, Ultratech, Adani Ports, Siemens, ConCor, Bharat Electronics, Honeywell Automation, Gujarat Gas, Solar Ind, KEC, Timken, APL Apollo, Birla Corp, BEML and KNR Construction.

Any measure to boost the real estate sector many aid cement stocks such as Ultratech Cement, building materials stocks such as Kajaria Ceramics, consumer electrical stocks Crompton Consumer and Voltas and paints stocks such as Asian Paints.

A reduction in the dividend distribution tax could reduce the cost of capital for MNCs and cash-rich companies such as Infosys, TCS, ONGC, IOC, Bajaj Auto, Hero MotoCorp, Hindustan Unilever, Colgate, Nestle, Hindustan Zinc, NMDC and Nalco.

Here’s how the ‘winners’ from last year's Budget fared

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By Karthikeyan Sundaram

From banks to farmers to the property market, the gains from India’s budget in July haven’t yet panned out as expected.

In her maiden budget six months ago, Finance Minister Nirmala Sitharaman pledged to boost revenue collection by 13%, narrow the fiscal deficit to 3.3% of gross domestic product and spur the economy to $3 trillion by March. Things haven’t gone according to plan though, largely because of a worsening slowdown in the economy, which has put pressure on government revenue and the fiscal deficit.

As the finance minister prepares to deliver her second budget on February 1, here’s a look at how the expected winners from last year’s fiscal plan fared:

And if the auto scrappage policy is finally announced, it will be a positive for all automobile stocks, while any labour reforms related announcements will be positive for staffing companies like Teamlease.

Sharekhan expects measures on three fronts: personal income-tax rate cuts to boost consumption; easing of pain for MSME & housing sectors and policies to attract private/ foreign investments.

This brokerage has Mahanagar Gas and Power Grid Corporation among its top pre-Budget picks from the energy sector. It also listed SBI, ICICI Bank and ICICI Prudential Life from the BFSI segment, UltraTech Cement and PNC Infra from infrastructure & building materials, Sudarshan Chemicals and SRF from specialty chemicals, M&M in auto, Bata India from consumer discretionary and JSW Steel from metals and mining sectors as its top pre-Budget picks.

IIFL Securities said since economic growth has been declining since last few quarters, the forthcoming Union Budget will have measures, reflecting the government’s intent to get the economic momentum back on track.

“The government might use the opportunity to announce policies that support growth. Some of the steps expected include lower personal income-tax rates, removal of LTCG, sector-specific import duty tweaks to promote domestic manufacturing and a revisit of the plan for sovereign issuance of bonds,” it said.

Here’s what Budget 2020 could look like

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With the Union Budget just a few days away, fund managers, economists, investors and traders are ready with their wishlists. From tweaks in LTCG, DDT to cut in personal income-tax slabs, the market is expecting some big-bang announcements from the Finance Minister.

We list out a few things the market will be looking out for in this year’s Budget:

(Source: iFAST Financial India Research Desk)